Equity crowdfunding originated in the start-up sector and has successfully proven the innovative power of leveraging an investment ecosystem. It enables investors and other stakeholders to collaboratively contribute to the due diligence process, untap the wisdom of the crowd, verify the credibility of entrepreneurs and provide them with feedback on business ideas and business model assumptions. Crowdfunding gives entrepreneurs access to reputable experts and talents, utilising their expertise and man-power. Furthermore crowdfunding gives entrepreneurs a great tool for receiving market feedback and validation of product features as well as opportunities to build relationships with potential new customers.
The development of community owned small renewable energy projects is in many aspects different from business start-up finance. For example such clean energy projects deploy mature technologies, which produce electricity, a product which doesn't need market or product validation. Such projects face other challenges. Community projects are typically small and geographically scattered and the development cost (per kw) are often higher compared to larger scale commercial developments. Community developers, who in many cases work on a voluntary basis, often lack knowledge about what sources of capital are available and how to market themselves. The community has not always access to the required expertise and the fundraising process is conducted manually. In addition an expensive marketing campaign is required to make those projects visible to investors outside the imminent community.
The power of connected ecosystems
How can crowdfunding contribute to overcome such challenges and how can project developers, looking to create, engage and leverage their community, benefit from the collaborative aspect of crowdfunding? First of all, a crowdfunding platform offers a great collaboration tool which gives community residents the opportunity to be engaged in the process and express their support and concerns already at planning stage of the project. It enables the community to connect with likeminded people which are geographically dispersed and it exposes their project to complementary skills which can fill the gaps in local expertise. Such regional collaboration leads to enhanced problem solving capabilities and lower costs through the creation of procurement pools. The development and sharing of best practise increases the probability of success substantially over stand alone projects.
Investors within the community and from outside equally benefit as crowdfunding enables them to evaluate projects during any stage of the project cycle. This gives them a multidimensional insight into the project and allows them to make better-qualified investment decisions.
In conclusion, there is a strong value proposition for using a collaborative crowdfunding platform for developing decentralized community owned clean energy projects. It deepens the investor and knowledge pool of community projects and it enables them to utilising synergies. The interactional value of crowdfunding enables community residents to become innovators, planners, and decision-makers on how to use and create energy that is local and renewable. The symbiosis between co-creation and co-ownership offers the perfect solution for a much needed accelerated transition towards a sustainable green economy.
Photo Credit: Joel Penner: https://bit.ly/p/4vG62g
Rex is an innovative banker with more than 15 years experience in retail banking, treasury and commodity trading at Commerzbank, J.P. Morgan and ABB Financial Services. Through his passion for entrepreneurship and new markets he got involved during the dot-com era in building up a business incubation unit for ABB, subsequently spinning off a company which pioneered the implementation of the European emissions trading scheme. He continued his career in the climate change sector first by joining EcoSecurties, a leading startup company in developing carbon reduction projects worldwide, and more recently as director in the environmental markets team of BNP Paribas.
Rex strongly believes that crowdfunding will cause a paradigm shift in the financial service industry and that it will make a significant contribution to the transition towards a sustainable economy.